Sat, Oct 30, 2021 page10

• Amazon forecast suggests its sales boom is ending

  UNDERPERFORMING: Shortages in labor and goods, along with supply woes, could send operating income to zero as spending returns to the offline world

  • Bloomberg
  • • 
    • 
    • 

  Amazon.com Inc told Wall Street that it would have to spend billions of dollars hiring workers, paying them more and even speeding partly empty trucks to their destinations to ensure that supply-chain snarls do not derail the holiday shopping season.

  The massive outlays could wipe out Amazon’s profit during the last three months of the year, executives said. The company also reported third-quarter revenue and earnings that fell short of projections. The shares declined about 4 percent in extended trading.

  Revenue is expected to be US$130 billion to US$140 billion in the period ending in December, the Seattle company said on Thursday in a statement. On average, analysts estimated US$141.6 billion, data showed.

  Operating income could be as low as zero, Amazon said, a step back for the company after reaping billions of dollars in profit each quarter going back to early 2018.

  The results reflected the first period under new CEO Andy Jassy, who took the helm of the world’s largest online retailer from Jeff Bezos in July. Amazon shares have gained 5.8 percent this year, underperforming the broader market, as consumers who turned to online ordering in record numbers during the COVID-19 pandemic began to resume in-person shopping, eating out and traveling.

  Amazon had signaled that slower sales growth, and high spending in areas such as wages and new warehouses, would persist through the end of the year.

  “Consumers have started to return to pre-pandemic spending patterns,” chief financial officer Brian Olsavsky said.

  Amazon is dispatching to a greater extent partly empty trucks, sending products on more circuitous routes and speeding some shipments to make sure that customers get their items within the company’s promised windows.

  While Amazon earlier this week sought to reassure shoppers and shareholders that its investments left it well prepared to weather the global supply chain woes, Jassy said the expansion would come at a cost.

  “In the fourth quarter, we expect to incur several billion dollars of additional costs in our consumer business as we manage through labor supply shortages, increased wage costs, global supply chain issues, and increased freight and shipping costs,” he said in the statement. “It’ll be expensive for us in the short term, but it’s the right prioritization for our customers and partners.”

  Supply chain and labor pressures could mean Amazon cannot deliver goods to customers as fast as usual, or that some hoped-for items might not be available despite the company’s extra spending, Capital Markets analyst Ed Yruma said.

  “They’re going to have to step up hiring,” Yruma said. “It’s more expensive, and those ‘out-of-stocks’ are going to be more severe than people expect.”

  Amazon employed more than 1.46 million full-time and part-time workers as of Sept. 30, a 30 percent increase from a year earlier. New-hire bonuses and wage increases added US$1 billion to the company’s expenses during the third quarter, and that cost could likely double during the holiday period, Olsavsky said.

  Third-quarter revenue increased 15 percent to US$110.8 billion, compared with analysts’ average estimate of US$111.8 billion. Earnings were US$6.12 per share, down from US$12.37 a year earlier, the company said.

  Investors were hoping that conditions would have improved since Amazon’s relatively gloomy outlook in July, M Science director of research John Tomlinson said.
• Most Popular

  • 1

    Rain to persist in central, south Taiwan: CWA

  • 2

    Taiwan issues tsunami watch after Russia quake

  • 3

    Osaka expo to showcase Taiwan folklore

  • 4

    China preparing to invade Taiwan: deputy foreign minister

  • 5

    Taiwan expects final US tariff rate soon: official